MOSCOW (MRC) -- The combination of increases in both travel and economic activity in the United States has contributed to more demand for gasoline, distillate, and jet fuel, as reflected in the product supplied data of Weekly Petroleum Status Report (WPSR), according to Hydrocarbonprocessing.
Although demand has increased for all three of these products from their 2020 lows, the extent of the demand growth has differed by product.
According to the June 23 WPSR, which includes data through June 18, demand for all three fuels was lower than during the same week in 2019, the year before COVID-19 mitigation efforts began in the United States. For the week ending June 18, the four-week average demand for gasoline was 94% of the four-week average for the same week in 2019, distillate was 98%, and jet fuel was 74%. At their lowest points in 2020, gasoline demand fell to 56% of its corresponding 2019 level, distillate demand to 80%, and jet fuel demand to 31%.
We estimate product supplied by the volume of petroleum products delivered out of the primary supply chain. Although product supplied is a reasonable proxy for consumption, weekly data may show volatility due to temporary demand, trade, or inventory fluctuations. As a result, a four-week rolling average often provides a better indication of longer-term consumption trends.
Based on rolling four-week averages, US gasoline demand fell from 9.3 million barrels per day (b/d) during the week of March 13, 2020, (when President Trump declared a national emergency) to 5.3 million b/d on April 24, 2020. Beginning in March 2021, however, demand started growing again, and consumption rose above 9.0 million b/d during the week of May 21 for the first time since March 20, 2020. For the week ending June 18, gasoline product supplied averaged 9.1 million b/d, 94% of the 2019 level for the corresponding week.
Demand for US jet fuel has also increased from its 2020 lows as personal travel has increased, but it has not approached its 2019 levels as closely as gasoline and distillate have. International travel restrictions, concerns about rising COVID-19 case counts in other countries, and reduced business travel have probably contributed to the relatively slower return in jet fuel demand. In addition, the growth in jet fuel demand may be slower than gasoline and distillate fuel if travelers continue to avoid flying. For the week ending June 18, jet fuel product supplied averaged 1.3 million b/d, 74% of 2019 levels for the corresponding week.
COVID-19 did not affect distillate consumption as much as gasoline or jet fuel consumption. Distillate consumption in the United States is driven by economic activity and is more directly affected by changes in freight transport than by reduced travel or work-from-home trends. Demand for distribution of necessities, such as food and medical supplies, and increased home deliveries for goods likely contributed to relatively stable demand for distillate fuel during 2020. For the week ending June 18, distillate product supplied averaged 3.9 million b/d, 98% of 2019 levels for the corresponding week.
As MRC informed previously, Asia's cash differentials for jet fuel flipped into premiums for the first time this year in early May, partly supported by firmer deals in the physical market, while prompt-month spread for the aviation fuel stood at its narrowest contango in more than two months.
We remind that slumping fuel consumption during the pandemic is accelerating the long-term shift of refining capacity from North America and Europe to Asia, and from older, smaller refineries to modern, higher-capacity mega-refineries. The result is a wave of closures, often centering on refineries that only narrowly survived the previous closure wave in the years after the recession in 2008/09.
We also remind that PetroChina has nearly doubled the amount of Russian crude being processed at its refinery in Dalian, the company's biggest, since January 2018, as a new supply agreement had come into effect. The Dalian Petrochemical Corp, located in the northeast port city of Dalian, was expected to process 13 million tonnes, or 260,000 bpd of Russian pipeline crude in 2018, up by about 85 to 90 percent from the previous year's level. Dalian has the capacity to process about 410,000 bpd of crude. The increase follows an agreement worked out between the Russian and Chinese governments under which Russia's top oil producer Rosneft was to supply 30 million tonnes of ESPO Blend crude to PetroChina in 2018, or about 600,000 bpd. That would have represented an increase of 50 percent over 2017 volumes.
Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.
MRC